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Here are 4 secured business lines of credit
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA secured business lines of credit | $5,000,000 | 650 | with Fundera by NerdWallet |
SBA Community Advantage line of credit | Best for Secured business lines of credit for startups | $350,000 | 600 | Read Review |
Bank of America Cash Secured Line of credit | 5.0/5 Best for Cash secured business lines of credit | $0 | 670 | Read Review |
Wells Fargo Prime line of credit | Best for Large secured business lines of credit | $1,000,000 | 700 | Read Review |
Here are 4 secured business lines of credit
Best for SBA secured business lines of credit
Best for Secured business lines of credit for startups
Best for Cash secured business lines of credit
Best for Large secured business lines of credit
Our pick for
SBA secured business lines of credit
Through the SBA’s CAPLines program, you can choose from four credit line options. Each line of credit is designed for a specific purpose, including working capital, seasonal slows, construction and contract orders.
SBA 7(a) loan
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
11.50-15.00%
Our pick for
Secured business lines of credit for startups
The Community Advantage (CA) program offers more flexible qualification requirements and faster funding times compared with other SBA loans. Not all CA lenders can issue credit lines.
SBA Community Advantage line of credit
Max Loan Amount
$350,000
Min. credit score
600
Est. APR
11.50-15.00%
SBA Community Advantage lines of credit help businesses and startups in underserved markets access working capital.
Max loan
$350,000
Min. Credit score
600
Apr range
11.50-15.00%
Our pick for
Cash secured business lines of credit
Companies with at least six months in operation can use Bank of America’s secured credit line to establish business credit. Timely payments can help borrowers graduate to an unsecured line of credit option.
Bank of America Cash Secured Line of credit
Max Loan Amount
$0
Min. credit score
670
Bank of America’s Cash Secured line of credit can help startups cover working capital needs and establish business credit.
Max loan
$0
Min. Credit score
670
Our pick for
Large secured business lines of credit
Wells Fargo’s secured business line of credit is available in amounts up to $1 million. This credit line is designed for established companies that need to finance larger working capital needs.
Wells Fargo Prime line of credit
Max Loan Amount
$1,000,000
Min. credit score
700
Wells Fargo’s secured line of credit is a good option for well-established businesses that want access to large amounts of working capital.
Max loan
$1,000,000
Min. Credit score
700
What is a secured business line of credit?
Secured business lines of credit are backed by some type of collateral, typically tangible business assets like property or equipment. The collateral you provide serves as a form of security for your lender — if you fail to repay, the lender can claim and sell your pledged assets to cover its losses.
Some lenders may also require a personal guarantee and/or a Uniform Commercial Code (UCC) filing — in addition to specific collateral.
A personal guarantee holds you personally responsible for the debt if your business can’t pay, and a UCC filing allows your lender to seize your business assets if you default. These documents provide further protection for your lender to ensure that your credit line is repaid.
How does a secured business line of credit work?
Like any other business line of credit, a secured credit line allows you to borrow from a set limit of funds and only pay interest on the money you borrow.
Then, you repay what you’ve borrowed over time — usually on a weekly or monthly schedule. You can continue to draw on your credit line, as needed, provided that you make timely payments and don’t exceed your credit limit.
Unsecured vs. secured business line of credit
Unlike secured lines of credit, unsecured business lines of credit are not backed by physical collateral. These credit lines may, however, require a personal guarantee and/or UCC lien. Despite the terminology, it’s unlikely that you’ll find an unsecured line of credit that doesn’t include any protection for the lender.
When you don’t provide collateral, lenders may see your business as more of a risk. As a result, unsecured lines of credit tend to have lower funding amounts, shorter repayment terms and higher interest rates compared with secured credit lines.
Pros and cons of a secured business line of credit
Pros
- Better rates and terms. When you provide collateral, you offset some of the risk a lender takes when issuing financing to your business. You should be able to qualify for competitive interest rates and repayment terms on a secured credit line — especially if you have a good credit history and strong finances.
- Increased chances of approval. Securing your line of credit with collateral can help strengthen your loan application, especially if you’re a newer business or you have a rocky credit history.
Cons
- Slower to fund. Secured business lines of credit can take longer to fund as your lender may require an appraisal of the assets you’re putting up as collateral. Compared with unsecured lines of credit, you’ll also have to provide more documentation describing your collateral and its value.
- Assets at risk. If you can’t repay your line of credit, your lender can seize the assets you used as collateral to recover their losses.
Where to get a secured business line of credit
Secured business lines of credit are available from traditional and online lenders. The right option for you will depend on factors such as funding needs, speed, interest rates and qualifications, among others.
Banks and credit unions
Banks and credit unions will typically provide credit lines with the most competitive interest rates and terms. These lenders may offer different ways to secure your line of credit — like a certificate of deposit or non-real estate business assets.
To qualify, however, you’ll generally need multiple years in business, good credit and strong finances. Business bank loans are also slow to fund. Wells Fargo’s secured credit line, for example, takes up to two weeks just for processing after you’ve submitted your documentation.
SBA lenders
SBA lenders offer secured lines of credit through the 7(a) loan program. Some SBA lenders, usually banks and credit unions, provide credit lines through the CAPLines program, which falls under the larger 7(a) umbrella.
There are four types of these SBA lines of credit, designed for specific use cases, such as working capital, seasonal slows and contract orders. To qualify, you’ll need to meet standard requirements for the SBA 7(a) loan program as well as criteria for the individual credit line you need. Collateral requirements also vary based on the specific credit line.
If you don’t qualify for one of these credit lines, you may be able to get financing through the Community Advantage (CA) program. This program is designed to help borrowers in traditionally underserved markets, such as startups and those in low-income communities.
These credit lines are issued by participating lenders, like SBA microloan intermediaries and certified development financial institutions. It’s important to note, however, that not all CA lenders are authorized to issue lines of credit, so you’ll want to check with any potential lender before moving forward.
Compared with other SBA loans, these credit lines have flexible qualification requirements and are often faster to fund. Lenders are not required to take collateral for credit lines of $50,000 or less, but they must follow their standard underwriting policies funding amounts greater than $50,000.
» MORE: How to qualify for an SBA loan
Online lenders
Online lenders tend to provide fast, flexible funding. Compared with bank and SBA lenders, these companies typically have more lenient qualification requirements but higher interest rates.
Although some online lenders may issue secured credit lines, many offer unsecured lines of credit instead. If you need faster access to working capital but don’t want to pay a premium on speed and flexibility, you might try talking to an online lender about its collateral policies.
Though the lender may not require collateral, it may allow you to secure your line of credit to access more competitive terms.
Find the right business loan
The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on May 25, 2023
Methodology
NerdWallet reviewed traditional and online lenders to create our list of the best secured business lines of credit.
Our list includes a variety of loan options to meet the diverse funding needs of small-business owners, with an emphasis on lenders that offer a streamlined underwriting and approval process.
Each small-business loan option on our list meets the following criteria:
• Maximum loan amount of at least $50,000.
• Transparent rates and repayment terms.
• Personal credit score requirements of 700 or below.
• No more than two years in business required.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
Learn more
Frequently Asked Questions
You typically secure a business line of credit with tangible assets such as:
- Property.
- Equipment.
- Inventory.
- Supplies.
- Invoices.
- Cash or savings.
To qualify for a secured business line of credit, you’ll usually need to provide collateral with a value equal to or greater than your desired funding amount. Although startups and borrowers with bad credit may be able to qualify for certain products, good credit and strong finances will help you access the best options.
You can build your business credit by making timely payments on your secured credit line and establishing a positive account history. You’ll want to make sure that your lender reports this information to the commercial credit bureaus — because if it doesn’t, your activity will not affect your credit score.